countries of transcaucasus u.s. bilateral aid to the the

The Political Underpinnings ofU.S. Bilateral Aid to the

Countries of Transcaucasus

EKATERINE METREVELI AND ÉSTER HAKOBYAN

T he fall of the Soviet Union, which resulted in the emergence of fifteen newstates, is considered the most dramatic and remarkable event of the second

half of the twentieth century. Efforts to gain independence involved not only inter-nal political developments and actors, but also each country's adapting to theinternational environment and restructuring foreign relations.' The Soviet suc-cessor states have tried to pursue foreign policies that would advance their nation-al interests and ensure support from the international community. They had toface the fact that with the end of the cold war new international and foreign actorswould influence political and economic developments.

The United States is an important actor in all of the countries. U.S. assistancepolicies are part of its influence and interests in the region. The Freedom SupportAct adopted by the U.S. Congress in 1992, while recognizing developments inthe former Soviet Union as a "historical opportunity for a transition to a peace-ful and stable international order," indicated that the success of the transition wasin the interest of the entire international community and emphasized the role ofthe United States in contributing to the transition.2

It is in the national interest of the United States to see the newly independentstates (NIS) as economically and politically stable democratic countries. U.S.policies toward the Soviet successor states are also based on its policy of export-ing its identity to the world. The values of democracy and free markets becomethe central concept of transition from communist authoritarianism and centrallyplanned economies to "Western-type societies." The outcomes of this transitionare thought more likely to benefit the United States if it remains engaged as apartner in the process, promoting its national security and values related to U.S.collective identity, as well as pragmatic considerations. Foreign aid is a majormechanism to achieve those goals. Aid policies also help the United States to

Ekaterine Metreveli and Ester Hakobyan are graduate students at the School of Public andInternational Affairs, University of Pittsburgh.

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368 DEMOKRATIZATSIYA

build constructive diplomatic, trade, and people-to-people relations in the region.The priority of U.S. interests for both its foreign relations and aid policies isexplicit in the statement of the former secretary of state Madeline Albright in theintroduction to the Congressional Budget Justifications for 2001. Albright quali-fied the term "foreign aid" as obsolete and replaced it with "international pro-grams that aid America" by making Americans more secure, supporting Ameri-can prosperity, supporting peace, and promoting views that Americans cherish,including democracy.3

Thus, it can be assumed that in the NIS, the United States pursues its own eco-nomic and political interests together with its general strategic goals. Those inter-ests are more obvious in relation to certain post-Soviet regions or states.

One such region is Transcaucasus (Southem Caucasus), comprising the coun-tries of Armenia, Azerbaijan, and Georgia. U.S. national interests in fulfillmentof the countries' potential as gateways from the Caspian Basin to the West com-bine such general objectives as advancement of free market and democraticreforms, promotion of peace, and regional stability. U.S. firms are heavilyinvolved in the development of Azerbaijan energy resources (gas and oil).' TheU.S. objective of diversifying world oil supplies is the key factor underlying itsregional policies. The United States views the region as a crossroads connectingEast and West, as a transportation corridor for Caspian energy resources. Each ofthe countries has a particular significance in advancing U.S. interests in theregion.

Each of the Transcaucasus states has a unique and specific character that deter-mines its role in relations among the regional powers and with the United States.Despite the proximity of the countries and their historical and cultural ties, dis-tinctive geographic, ethnic, religious, political, and economic differences havebeen formed during the centuries. Those features influence the foreign policiesthat the countries pursue as well as U.S. interests.

U.S. Interests in Transcaucasia

Their location at the crossroads of Southern Europe and at the western border ofAsia greatly affected the histories of the three Transcaucasus states. The threenations were constantly attacked and controlled by Persian, Ottoman, or Russianempires. In response to those threats, the populations of the countries have under-gone different degrees of displacement, formulated policies that make themadaptable to the hostile environment, and developed a strong sense of nationalidentity that helped them to survive.

For Georgia and Armenia, adoption of Christianity early in the fourth centurywas imperative to maintain their national identity and statehood. Azerbaijan wasnever a Christian country; the Zoroastrian religion was succeeded by the Muslimfaith introduced by Arabs in the seventh century. Despite the differences in reli-gion, Azerbaijan and Georgia both differed from Armenia in the diversity of theirethnic composition. Both states were known for having multiethnic societies-18 percent minority in Azerbaijan and 30 percent in Georgia-while Armeniaremained a strongly homogeneous country.5

U.S. Aid to Transcaucasus 369

History has influenced not only the ethnic composition of the states but alsothe migration of indigenous ethnic groups outside the countries. More than halfof the world's 6.3 million Armenians are widely scattered outside the borders ofArmenia as a result of a centuries-long diaspora and step-by-step reduction oftheir national territory. Azerbaijan has only 5.8 million of the world's estimated19 million Azerbaijanis, most of whom live in Iran.6 In contrast to Azerbaijan andArmenia, most Georgians live in Georgia, together with the diverse ethnic minori-ties already mentioned.

Although all three countries are part of Transcaucasus, Azerbaijan can be con-sidered the most favorably located-by the Caspian Sea with its energy resources.Georgia also enjoys an advan-tageous position by the BlackSea, which malees it important "Armenia considers Russia its main

in the transit corridor connect - ally, a source of support anding the East with the West. protection against the perceivedArmenia is landlocked and threats poned by Muslim Azerbaijanthus deprived of opportunities „to communicate with the out-side

and Turkey.

world without good rela-tions with its neighbors.

All three countries liewhere the interests of the threemost powerful countries in the region-Russia, Turkey, and Iran-collide. Thestruggle for influence over Transcaucasus republics became the main determinantof the political processes in the region during the past decade, after the collapseof the Soviet Union. For Russia, it is imperative to have military bases in Cauca-sus, and to restore control over the natural resources of the Caspian basin and thetransportation routes of Georgia. Turkey's main interests are economic domina-tion and prevention of Russia's military pressure on its borders. A member ofNATO, Turkey also directly represents the interests of the West-specifically theUnited States-in the region, counterbalancing the Russian presence and Iranianfundamentalism. The situation with Iran is completely different. During the firstyears of independence, the leaders of the Azerbaijani Popular Front emphasizedclose cultural and political relations with Turkey, Iran 's traditional rival in theregion. More than ten million Azeris live in Iran , and on many occasions the lead-ers of the Popular Front raised the issue of reunification of northern and south-em (Iranian) Azerbaijan.? Those factors constrained the development of closerrelations between Azerbaijan and Iran. Although Iranian religious organizationstry to penetrate Azerbaijan under the pretext of Muslim brotherhood, leaders ofthe country are determined not to allow the advance of Islamic fundamentalism.Iran's relations with Russia are another factor pushing Iran into more favorablerelations with Armenia.

The Transcaucasus republics do not have a common policy but pursue indi-vidual goals and agendas determined by centuries of development, different per-ceptions of reality, and different images of an enemy. Even relations among the


Transcaucasus states do not fit into any standard pattern. Despite the commonChristian religion, relations between Armenia and Georgia are not as warm asbetween Christian Georgia and Muslim Azerbaijan or Turkey. A number of eco-nomic and political factors have contributed to this, including Azerbaijani fueland Georgia's transit opportunities. Also, Georgia and Azerbaijan refused anyRussian influence after specific turning points. (For Azerbaijan this was 20 Jan-uary 1990, when Russian troops entered Baku; for Georgia it was 9 April 1989,when Russian armed forces overran peaceful demonstrators in Tbilisi.) Armenia,however, considers Russia its main ally, a source of support and protection againstthe perceived threats posed by Muslim Azerbaijan and Turkey, a fear rooted inArmenian genocide by Turks in the beginning of the century. Armenia also relieson Russia's support in its conflict: with Azerbaijan over Nagorno-Kharabakh,which remains unsettled and has a major impact on both countries' foreign aid

policies as well as on U.S. aid.Nagorno-Kharabakh and conflicts in Georgia in the early 1990s with its sep-

aratist regions of Abkhazia and South Osetia put Transcaucasus in the news.Although all of the three republics engaged in conflicts, the nature of the engage-ments and the reaction of the international community were different. Nagorno-Karabakh became an international issue because of the involvement of two sov-ereign states, which determined to some extent U.S. aid policies toward thosecountries. Conflicts in Georgia, despite their ethnopolitical character, were con-sidered more in the context of economic issues connected with border control,which had a negative effect on the country's economy and did not impose onGeorgia any sanctions from the international community.

The aboye trends helped to identify certain patterns in the U.S. approach to

Georgia, Armenia, and Azerbaijan:

• Georgia is an important geopolitical hub in the Caucasus region as the west-ern portal to the Great Silk Road and the newest conduit of Caspian oil to worldmarkets. Its neutrality in the Nagorno-Karabakh conflict makes it a stabilizingfactor in the region, especially betvveen Armenia and Azerbaijan. It is considereda buffer state between Turkey and Russia, between Muslim and Christian coun-tries, and has a Western orientation. Shevardnadze still plays a significant role.

• Azerbaijan is a country rich in energy resources. The U.S. government isencouraging the diversification of its oil supply to ensure U.S. and global energysecurity; imports from Central Asia and Azerbaijan can become one source ofsuch diversification. A substantial shift can be seen in U.S. administration inter-ests in Caspian oil resources. Man y members of President Bush's administrationhave been in some way connected with U.S. oil companies active in Azerbaijan.8This explains the revived U.S. interest in settlement of the Nagorno-Karabakh

dispute.

• Armenia's engagement in a dispute with Azerbaijan over Nagorno-Karabakh is a major cause of instability in the Caucasus region. Achieving adurable resolution to the conflict is key to U.S. interests, as it will facilitate Arme-nia's economic cooperation with its Caucasus neighbors and facilitate develop-


ment of Caspian energy resources. Armenian constituencies are represented byinfluential lobbyists in the United States. Russian presence and influence havediminished, although Armenia is Russia's major ally in the region.

U.S. energy interests in the Caucasus are in line with its other goals in theregion: establishment of democracy and a market economy, humanitarian relief,regional stability, the settlement of territorial disputes, and integration of Arme-nia, Azerbaijan, and Georgia into the regional and global economy. Those goalsare mutually reinforcing and are closely related to the long-term transformationof the former republics. Foreign aid is the major mechanism to achieve them.

U.S. Aid Policies in the Region

Since the passage of the Freedom Support Act in 1992, approximately $16.6 bil-lion has been appropriated for assistance to the NIS, including $7.5 billionthrough the Freedom Support Act.9 Twenty-seven percent of NIS assistance ischanneled to South Caucasus countries. Of this amount, Armenia and Georgiareceive 11 percent each, leaving Azerbaijan with the remaining funds. The Free-dom Support Act prohibits certain types of assistance to the government of Azer-baijan until it takes steps to lift its economic blockade against Armenia.

Since 1992, the bulk of U.S. assistance to Transcaucasus has been emergencyhumanitarian aid, which was necessary because of the displacement of hundredsof thousands of people in all three countries as a result of ethnic conflicts in Abk-hazia and South Ossetia in Georgia and conflict over Nagorno-Karabakh in thecase of Azerbaijan and Armenia. In Armenia, humanitarian assistance was alsosent in response to the disastrous 1988 earthquake. In both Georgia and Armenia,poor economic conditions were aggravated by a severe energy shortage, whichdid not affect Azerbaijan because of its vast energy supplies. Azerbaijan had toaccommodate the largest number of internally displaced persons and refugees asresult of the conflict. Thus in 1992-95 U.S. humanitarian assistance providedmainly food, heavy oil for electricity generation and winter heating, medications,and wheat, which played a key role to meet humanitarian needs in all three coun-tries.

Although conflicts have not been resolved, relative stability has been achievedthrough the lasting cease-fire and the deployment of peacekeepers in conflictregions, which allowed the respective governments to direct efforts toward eco-nomic and social reforms. U.S. assistance has shifted from humanitarian goals toeconomic and social sector restructuring and democratization. All three countrieswant to achieve democracy building, economic restructuring, and market reforms.

We are making certain assumptions about the priorities of the United States inthe Caucasian countries based on two major documents-the Congressional Bud-get Justification for Foreign Operations10 and a draft of "U.S. Government Assis-tance to and Cooperative Activities with the New Independent States of the For-mer Soviet Union. "11 We also obtained information through interviews withgovernment and embassy officials.

In Georgia the emphasis is on programs that strengthen the country's ability


to control its borders and promote its territorial integrity, to prevent conflicts out-side its borders from spilling into the country, and to eliminate smuggling andensure proper collection of revenues to improve the economy.

In Armenia, the focus is primarily on economic/political and social institutionbuilding, with emphasis on the earthquake zone reconstruction.

Azerbaijan receives assistance for humanitarian purposes despite the overallshift of U.S. assistance policies lo development programs.

U.S. bilateral aid and funding under the Freedom Support Act for FY2000 loeach of South Caucasian countries for the past three years are as follows:

• Armenia-$124.18 million, $102.46 million of which is under the FreedomSupport Act

• Azerbaijan-$50.61 million, $21.8 million of which is under the Freedom Sup-

port Act• Georgia-$149.56 million, $108.64 million of which is under the Freedom

Support Act

Although the amount of aid to Azerbaijan is still less than to Georgia and Arme-nia, it increased from $9 million in 1994 to $50.61 million in 2000.

It is impossible within the scope of this article to discuss individual programs,their implementation and impact, successes or failures, but we will look at polit-ical dynamics that shape them. Therefore, to explain the imbalance of U.S. assis-tance to Armenia and Azerbaijan, we will concentrate on the case of Georgia, theimpact of the Nagorno-Karabakh conflict, and Section 907 of the Freedom Sup-port Act.

Imbalances in U.S. Assisitance to Armenia and Azerbaijan:Causes and Politics

U.S. strategic, economic, and political interests in the region are best served if alasting peace and a balance of power are established in the South Caucasus. Thesettlement of the dispute over Nagorno-Karabakh is essential for economic andpolitical stability.

The Conflict over Nagorno -Karabakh

The Nagorno-Karabakh autonomous region of Azerbaijan SSR (NKAO) occu-pied the southeastem part of the Lesser Caucasus and covered 4,388 square kilo-meters. The population of NKAO at: the beginning of 1989 was 182,000, of which137,200 (73.4 percent) were Armenian, 47,400 (25.3 percent) were Azerbaijani,and 2,400 (1.3 percent) represented other nationalities.12

The dispute began when Karabakh Armenians demanded the transfer ofNKAO from the jurisdiction of the Azerbaijani SSR to the Armenian SSR.Administratively, NKAO has never been part of Armenia. Under the tsarist empireit had been part of Baku province. Armenia and Azerbaijan fought for the enclavein the late 1910s and early 1920s before the sovetization of the republics. TheCaucasus Bureau of the Bolshevik Party awarded Nagorno-Karabakh andNakhichevan to Azerbaijan. Armenians considered this action to be unjust.


However, Armenians and Azeris lived side by side in Nagorno-Karabakh through-out the Soviet period. The Soviet era left a clear perception of grievance on thepart of Karabakh Armenians, who felt that they received an inadequate share ofinfrastructural and other capital investment.13

Tensions persisted until perestroika and the collapse of the Soviet Union in thelate 1980s. Gorbachev's policies of greater openness gave Armenians inKarabakh an opportunity to demand self-determination and unification withArmenia. A resolution to that effect was passed by the Nagorno-KarabakhSupreme Soviet on 20 February 1988. With this began years of declarations backand forth by the Armenian and Azerbaijani Supreme Soviets respectively sup-porting or rejecting Karabakhunification with Armenia. Theconflict deteriorated into eth- "Azerbaijan suffered as a result of

nic violence and full-scale war the conflict as security issues tookin 1991, when both countries priority oven economic restructuring,declared independence. In thus resulting in the decline of theMay 1994 a Russian brokered , „cease-fire was signed. By that country s economy.

time Karabakh Armenianforces had occupied areas ofAzerbaijan surrounding theenclave, extending to the Iran-ian border in the south and between Karabakh and Armenia (the Lachin corridor)in the west. Five years of war and ethnic murder killed an estimated 25,000 peo-ple and displaced 600,000-650,000 Azeris to other parts of Azerbaijan and anoth-er 15,000 Armenians inside Karabakh. The exchange of population betweenArmenia and Azerbaijan resulted in 500,000 refugees.14

Both Azerbaijan and Turkey blockaded Armenia. Because communication andtransportation through Georgia were also disrupted, the blockades resulted in ahumanitarian crisis for Armenia. The country became isolated from the rest of theworld. Because Armenia's primary natural gas pipeline crosses Azerbaijan, thesevere energy shortage added to the deterioration of the situation. Blockades alsoprevented humanitarian assistance to Armenia, which resulted in horrendous suf-fering because the state could not provide for both refugees and the victims ofthe 1988 earthquake. People suffered through the winters of 1992 through 1995when electricity was cut off, and most of the population had to survive withoutheat, water, or cooking facilities (although there was not much food to cook).

Azerbaijan also suffered as a result of the conflict as security issues took pri-ority over economic restructuring, thus resulting in the decline of the country'seconomy. The lack of military success was one of several factors causing politi-cal instability and civil unrest in the country. More than 700,000 internally dis-placed people and refugees aggravated the situation. In general, the number ofpeople affected by the conflict is twice as large in Azerbaijan as in Armenia. Azer-baijan has lost 20 percent of its territory. The persisting conflict creates barriersto more active foreign investment into Azerbaijan's energy sector, which is its


most probable opportunity to norrnalize the economy. Foreign aid is also verymuch conditioned on Azerbaijan's involvement in the conflict.

In 1992 a peace process was initiated by the Organization for Security andCooperatioin Europe (OSCE), referred to as the Minsk group The initiative is co-chaired by the United States, France, and Russia. A recent development in theprocess is the Key West, Florida, conference of 2-8 April 2001, which sought toreach a consensus to resolve the status of Nagorno-Karabakh.

Section 907 of the Freedom Support Act

In 1992, when the Freedom Support Act was passed by the U.S. Congress, the Tran-scaucasian countries were still at war, with military advantage shifting back andforth from one country to another, and Armenia was experiencing a humanitariancrisis. Those lobbying for the Armenian diaspora were able to have Section 907included in the Freedom Support Act to restrict government-to-government aid toAzerbaijan. The act stipulated that "United States assistance under this or any otheract (other than assistance provided under Title V of this act) may not be providedto the government of Azerbaijan until the president determines [and] reports to Con-gress, that the government of Azerbaijan is taking demonstrable steps to ceaseblockades and other offensive uses of force against Armenia and Karabakh."15

More than eight years have passed lince the adoption of the restrictive provi-sions. Six exemptions have been made to Section 907, including humanitarianassistance programs, democracy-building programs, confidence-building pro-grams, U.S. Export Import Bank programs, U.S. Trade and Development Agencyprograms, and Oversees Private Investment Corporation (OPIC) programs.

The Clinton administration regularly appealed to the Congress to repeal Sec-tion 907, pointing out its negative effect on U.S. interests. The Congress, how-ever, has so far maintained the restrictive section, which is considered the great-est achievement of the Armenian lobby, represented by the Armenian Assemblyof America and supported by the bipartisan Congressional Caucus on ArmenianIssues. The congressional caucus was initiated by congressmen Frank Pollone (D-NJ) and Edward Porter (R-IL). Since its inception the caucus has exercised lead-ership in the House of Representatives on a full range of assistance programs forArmenia; humanitarian assistance to Karabakh; the Azerbaijani blockades onArmenia and Karabakh; the Karabakh peace process; and Armenian genocide.

Despite relaxation of the sanctions on U.S. bilateral assistance to Azerbaijanthrough the exemptions mentioned, the existence of Section 907 constantly caus-es different reactions from the Azerbaijani, Armenian, and American parties. TheAzerbaijanis say that the restriction unfairly singles out Azerbaijan as the onlyformer Soviet Republic that cannot receive U.S. assistance. Azerbaijani officialsand the public believe that the sanctions have never reflected the political or diplo-matic realities in the Caucasus regiion and that the conditions that existed in 1992have changed dramatically. Azerbaijan has made strong and internationally rec-ognized commitments toward a permanent, peaceful solution of the conflict; sincepassage of Section 907, Armenia has emerged as an aggressive nation that occu-pies a sizable portion of the internationally recognized territory in Azerbaijan;


neither the United Nations, the United States, nor any other country recognizesNagorno-Karabakh as an independent state or part of Armenia.

Sanctions are seen as misguided and counterproductive. Providing more than$100 million in assistance to Armenia and almost nothing to Azerbaijan preventsthe United States from playing a positive role as an impartial and honest brokerin search of a permanent, peaceful solution. It impedes political, commercial, andsecurity relationships between the United States and Azerbaijan.11

By contrast, Armenians do not see Section 907 as a sanction but as a reason-able restriction on U.S. assistance, as it allows for the delivery of humanitarianand democracy-building aid to Azerbaijan. They claim that since 1992 the Unit-ed States has provided morethan $180 million in humani-tarian and exchange assis- "Supporters of sanctions say that thetance to the people of Azer- blockade caused great hardship inbaijan. Section 907 does not

Armenia and U.S. economic andprevent Trade and Develop-ment Agency guarantees and humanitarian aid was neededfor

insurance for U.S. firms people to survive."investing in Azerbaijan, nordoes it prevent Foreign Com-mercial Service operations,Export Import Bank programs, and OPIC activities in the country.

As understood by its proponente, Section 907 constitutes a focused, appropri-ate message to the government of Azerbaijan that the United States will not sup-port efforts to marginalize via blockades whole populations of neighboring states.11

The U.S. Congress is split between supporters of the legislative restriction(comprising mostly members of the Armenian Caucus) and those who thoughtthat the Clinton and Bush administrations should encourage closer relations withAzerbaijan and change aid policies. Supporters of sanctions say that the block-ade caused great hardship in Armenia and U.S. economic and humanitarian aidwas needed for the people to survive in the terrible years of 1992-95. They saythat it is not the intent of Section 907 to interfere with humanitarian assistanceto Azerbaijan and that without it Azerbaijan would have been less likely to agreeto a cease-fire in 1994.

Foreign policymakers and major energy corporations are among the mostnotable opponents of Section 907. They believe that Section 907 hinders U.S. abil-ity to influence Azerbaijan's post-Soviet transition and inhibits efforts to diversi-fy the U.S. energy supplies. Because of the restriction, the United States is unableto implement programs that help Azerbaijan to democratize (although USAIDrecently added democracy-building programs to its portfolio) and establish a mar-ket economy. Assistance to privatization of industry and infrastructure along withprograms supporting macroeconomic reforms are not allowed in Azerbaijan.American companies in energy, transportation, telecommunications, and othersectors may lose significant opportunities in Azerbaijan because American restric-tions are not supported by the European countries, or by Japan and Turkey.


We believe that, for the following reasons, Section 907 is not beneficial forany of the parties involved:

• Azerbaijan is the country that bears both the moral and material conse-quences of the sanction. Section 907 creates resentment, as it is perceived that thecountry is unjustly labeled an aggressor and violator of international rules, whilein reality it lost 20 percent of its territory to Armenia and is facing a greaterhumanitarias crisis than Armenia because of much larger numbers of internallydisplaced persons and refugees. The war and the limitation of economic reformand democracy-building programs are inhibiting the country's transition to ademocratic and free-market-oriented society.

• Armenia is not excluded fronn the negative impact of the sanctions againstAzerbaijan, especially in the case of military assistance. Armenia is not eligiblefor the programs from which Azerbaijan is excluded. The blockades have not beenlifted. The existence of Section 907 may become a limiting factor in reaching aconsensus over the status of Nagorno-Karabakh. U.S. restriction of aid is not sup-ported by the European Union, which tends to offset the existing imbalances inaid. Azerbaijan has two additional sources of aid: organizations from Muslimcountries and major energy companies that are involved in negotiations withBaku. Thus, the ultimate goal of restricting aid to Azerbaijan may not be achieved.Armenia's image may also suffer as the country emerged a winner in the war andoccupies hostile territories, the humanitarian crisis is left behind, and the coun-try is getting considerable amounts of aid from various donors. More and more,Section 907 is being viewed as a means of marginalizing a neighboring country.

• Tensions between the United States and Azerbaijan limit American econom-ic presence in Azerbaijan, allow increased competition from European and Japan-ese companies in the energy sector, and impede Azerhaijan's advancement towarddemocracy and a market economy (a condition for successful economic relationsbetween the two countries). Because American economic interests are better servedby peace and stability in the region, the role that the United States claims as a peacebroker in the region may be jeopardized by the sanctions, which make Azerbaijanskeptical that the United States is unbiased in the peace negotiations.

Repeal of Section 907 is more likely under the Bush administration, as it isclaimed that many of those close to Bush have heavy investments in the regionand "stand to lose in heightenedArmenian-Azerbaijan tensions."8 Illustrating theU.S. interest in such a development is its sponsorship of the peace conference inKey West, Florida, in April 2001. We expect the future of Section 907 to becomeanother focus of the Bush administration.

Case Study : Georgia

Unlike Azerbaijan or Armenia, Georgia does not have an ethnic group or diaspo-ra that supported its interests or promoted its international recognition in the early1990s. In 1992, in the midst of civil unrest, former foreign minister of the Sovi-et Union Eduard Shevardnadze became president of Georgia. That event marked


the end of Georgia's international isolation. Many argue that Shevardnadze'sclose ties with Western leaders and his reputation as Gorbachev's close ally inimplementing reforms significantly influenced the West's relatively warm rela-tionship with Georgia. Since 1992, Georgia's foreign relations have been orient-ed toward the West in an effort to reduce Russian influence and gain support fromthe West. Governments in the West saw Shevardnadze as the guarantor of demo-cratic development and began to support Georgia in its transition to a democrat-ic society. Germany was the first country to officially recognize Georgia, followedby the United States a few months later. Both countries have played an active rolein Georgia's development. The German presence has been felt in every level ofsociety and almost every field of activity; however, the same cannot be said aboutU.S. assistance programs.

Officially, the main policy objectives of the United States are to promote Geor-gia's development as a stable, independent, democratic, market-oriented state,with good relations with its neighbors and strong links to the West.19 In otherwords, the United States seeks to create a stable buffer zone between Turkey andRussia and use Georgia as a means of loosening Russian influence in the Tran-scaucasus region. Georgian political elites understand that stability and loosen-ing of Russia's influence can be achieved by economic prosperity and by usingits location as a zone for transporting Caspian energy resources to Western mar-kets. Thus, in shaping its foreign policy Georgia is emphasizing its importanceas the gateway to trade routes linking East with West and its neutrality in Arme-nia-Azerbaijan conflict. Georgia's game plan well suits the United States. Despitethe end of the cold war, the balance of power with Russia remains an importantissue, and Russia's most important asset is still oil. With regard to U.S. aid toGeorgia, American and Georgian officials seem to have a good working rela-tionship and consensus on various programs.

Since 2000 there has been a change in overall U.S. aid policies: the focus ongovernment-to-government programs shifted to grassroots programs to enhancedemocracy development through NGOs, independent media, and small business-es. But even with this policy, exceptions are made for countries where govern-ments are open to reforms. Despite the slow progress in Georgia (and Ukraine),the United States sees the govemment as moving in the right direction in sever-al key areas. Thus the government of Georgia is provided robust technical assis-tance. Some argue that it's strange to talk about a reform-minded government,when in the April 2000 elections President Shevardnadze received 79.8 percentof the vote with a 75.8 percent turnout.20 However, U.S. interests in the region,and specifically in Georgia, are much more than just promoting democracy.

Despite its imperfect performance on its way to democracy and the govern-ment's failure to fight existing corruption, the United States is strongly commit-ted to support Georgia and counterbalance the Russian presence through aid pro-grams supporting Georgia's sovereignty and territorial integrity. The issue ofterritorial integrity involves border control, the government's ability to raise rev-enues from the whole country, including Abkhazia and South Ossetia, and Geor-gia's relations with Russia, which are further complicated by ongoing negotia-


tions on the withdrawal of Russian military bases from Georgia and by the mili-tary campaign in Chechnya.

To address these goals, the United States is devoting large amounts of aid andattention to three programs:

• Border Security and Law Enforcement, a $20 million assistance programimplemented through U.S. Customs and the U.S. Coast Guard. The program ini-tially concentrated on Georgia's Maritime Border Guard Forces, assisting to buildan infrastructure to defend the Black Sea coastline. Because of recent develop-ments in Chechnya the program shifted focus temporarily to the Georgia-Russiaborder in the Chechnya region to prevent the conflict from spilling onto Georgianterritory.

• Facilitating the withdrawal of Russian forces from Georgia. Under an agree-ment reached at the OSCE Summit in November 1999, Russia is to withdraw twoof its military bases (Gudauta and Vaziani) from Georgia by mid-2001. InFY2001, the U.S. Department of State allocated $10 million for military reloca-tion assistance under the Threat Reduction Initiative; an additional $8 million isrequested for the same program.

• Improvement of readiness capabilities of the Georgian armed forcesthrough Foreign Military Financing (FMF) and International Military Educationand Training (IMET). The IMET budget for FY2000 was $415,000, and for FMF,$3.0 million, with $475,000 requested for IMET and $4.5 million for FMF forFY2001. Georgia is the only country in South Caucasus eligible for FMF andIMET programs, as the existente of Section 907 restricts both Azerbaijan andArmenia from receiving of any type of military aid from the United States.

Under FMF, Georgia was given $10 million to purchase six UH-1H helicoptersand train thirty-four pilots and maintenance personnel. The money was allocatedin 1998, but because training personnel required time, delivery of the helicopterswas scheduled for mid-2001.

Another sphere of U.S. assistance in the Congressional Budget Justificationfor Foreign Operations is economic and democratic reforms, "aiming to supportGeorgia's integration within the Euro-Atlantic political security structures"2'Several programs are emphasized, from which we have selected judicial reform,energy privatization, and land-titling programs, as those programs contain con-troversia) relationships of donor and recipient.

All small and medium businesses have been privatized in Georgia, as they havein Azerbaijan and Armenia. But differences exist with the large, more importantenterprises. Armenian and Azerbaijani governments oppose the privatization ofbig enterprises because of their own, or national, interests, as they bring revenueto the state budget. However, the Georgian government agreed to privatize largeenterprises. Georgia's official policy toward privatization is to look for a strate-gic investor, because officials tend to believe that foreigners would be more hon-est than Georgians, which would help eliminate corruption.

U.S. assistance in privatization is focused on the energy sector. It is the U.S.


long-term goal to privatize Georgia's energy sector and reduce the potential forpolitical pressure from outside countries, specifically from Russia. Georgia isdependent on Russia for its energy resources. As a result, the Tbilisi energy dis-tribution company Telas¡ was privatized by an American investor, AES. If boththe U.S. and Georgian governments are happy with the privatization, the samecannot be raid about the local level. The capital of Georgia, Tbilisi, is still expe-riencing an energy crisis, and feelings toward the American company and towardthe idea of privatizing the energy sector have been negative among the public.The same negative attitude has been observed toward privatization of large enter-prises in other fields, too, specifically the privatizing of the Sagarejo wine facto-ry by the U.S. company New Century Holdings. The local people who used towork in the factory were against privatization, but the issue was resolved in favorof the U.S. company.

If the Georgian government supports privatization despite opposition from thepublic, it does not agree with the U.S. aid policy in every sphere. Contradictionsand frustration were experienced by U.S. embassy and USAID personnel in Geor-gia regarding two programs-land titling and wheat donation.

The land-titling (land privatization) program to accelerate development of aland market has been implemented by USAID with the Landowners Rights Asso-ciation, which has worked with the Georgian government to accelerate land pri-vatization. Also with USAID support, a legal team was established in the Geor-gian parliament to advise on key issues related to land markets. More than a millionparcels of land have been distributed to the agrarian population. The goal of theprogram was to continue until the target total of three million land titles had beenreached. In 2000, the Georgian parliament voted to transfer the land privatizationproject to a German company, which is financing the program through a loan.

The wheat donation program, aid to Georgia under PL 480 through the Depart-ment of Agriculture, had double goals. In addition to providing Georgia withwheat, it was also to strengthen the state budget by collecting revenues fromwheat sales. In 1999, the Ministry of Agriculture decided to use the money fromwheat sales for funding grape purchases instead of keeping it in the state budgetas had been agreed. The land-titling and wheat programs demonstrate thatalthough there appears to be consistency in U.S.-Georgian goals, the situation issomewhat different when cooperating on specific programs.

One of the most successful aid programs is judicial reform. The U.S. 2000Annual Report calls the judicial reform program to increase the independence ofthe judiciary highly "ambitious." The program is administered with the supportof USAID through the American Bar Association Central and East European LawInitiative , with significant involvement of the Georgian Council of Justice. Theresponses from the people and press have also been positive. Success of the pro-gram can be explained by the active involvement of the strong NGO sector func-

tioning in thejudiciary sphere and because of the personal qualifications and ded-ication of the so-called father of the reform, Minister of Justice MichaelSaakashvili. Thus assistance succeeded when the donor, recipient, government,and NGO sectors worked for the same goal.


Conclusion

As we noted, U.S. strategic interests in the Transcaucasus region are basical-ly concentrated on transporting Caspian energy resources lo Western markets. Toachieve that goal the United States needs lo assist Transcaucasus countries loreach political and economic stability and peace and to loosen Russia's influencein the region. The United States views Georgia as the country most able lo assistin promoting U.S. interests in the Transcaucasus region. Georgia is best suitedbecause it is Western oriented, eager lo end Russia's influence in the country, andneutral in the conflict between Armenia and Azerbaijan, and it has good relationswith Turkey. Therefore, Georgia is in a position lo become the transportation hubof major trade and pipeline routes connecting East with West.

President Shevardnadze also plays the role of political guarantor of Georgia'sWestern orientation vis-á-vis Russia. For example, Shevardnadze received a let-ter from U.S. president Bush on 23 April 2001 expressing the new administra-tion's readiness to cooperate with Georgia. The letter assures Georgia's leaderthat the United States will "tender, much wider assistance to Georgia" and "we[the United States] shall protect and help you in every situation, no matter whatthe conditions are." One of the statements in the letter, which partially explainsthe favorable attention of the United States, concerns the "vast experience andauthority" of its leader, which should be used lo shape the new generation as soonas possible.21

NOTES

1. Adeed Dawisha, "Introduction," The Making of Foreign Policy in Russia and theNew States of Eurasia, ed. Adeed D,awisha and Karen Dawsha (Armonk, NY: M. E.Sharpe, 1995), 4

2. Public Law 102-511, 102nd Cong. (24 October 1992), Freedom Support Act of1992, 3322.

3. Office of the Secretary of State, Resources, Plans, and Policy, Congressional Bud-get Justification for Foreign Operations, Fiscal Year 2001 (Washington, DC: Author,2001), 2.

4. Office of the Secretary of State, Congressional Budget Justification, 479.5. Glenn E. Curtis, ed., Armenia, Azerbaijan, and Georgia: Country Studies (Wash-

ington, DC: Federal Research Division, Library of Congress, 1994), xxiii.6. lan Bremmer and Ray Taras, eds., New States, New Politics: Building the Post-Sovi-

et Nations (Cambridge: Cambridge University Press, 1997), 439-507.

7. S. Neil MacFarlane and Larry Minear, "Humanitarian Action and Politics: The Caseof Nagorno-Karabakh," Occasional Paper 25, Thomas J. Watson Jr. Institute for Interna-tional Studies, Brown University, 1997, 27.

8. Jay Hancock, "Final," Baltimore Sun, 2 April 2001.9. Office of the Secretary of State, Congressional Budget Justification, 477.

10. Office of the Secretary of State, Congressional Budget Justification, 477.11. "U.S. Government Assistance to and Cooperative Activities with the New Inde-

pendent States of the Former Soviet Union," FY2000 Annual Report, draft prepared by theOffice of the Coordinator of the U.S. Assistance to the NIS, January 2001.

12. Data from the State Committee of Statistics of Azerbaijani Republic.13. MacFarlane and Minear, "Humanitarian Action and Politics."14. Greg Hansen, "Humanitarian Action in the Caucasus: A Guide for Practitioners,"

Occasional Paper 32, Thomas J. Watson Jr. Institute for International Studies, Brown Un¡-


versity, 1998, 12.15. Public Law 102-511, Freedom SupportAct, Sec. 907.16. Press releases of Azerbaijani Embassy in the United States and Azerbaijan Society

of America, <www.azerbaijan-america.org>.17. Materials of Armenian Assembly, Section 907 of the FSA, <www.aaainc.org

/907intro.htm>.18. Hancock, "Final."19. Office of the Secretary of State, Congressional Budget Justification, 487.20. Anatol Lieven, "Georgia: A Failing State?" Eurasia Insight, 5 February 2001,

<www. eurasianet.org>.21. Office of the Secretary of State, Congressional Budget Justification, 483.22. "U.S. Government Assistance to and Cooperative Activities with the New Inde-

pendent States of the Former Soviet Union," 43.23. "U.S. President Supports Georgian Democracy, Leadership, Policy," Georgian

Television, Tbilisi, BBC Monitoring@ BBC, 23 April 2001.

countries of transcaucasus u.s. bilateral aid to the the

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